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Oce Announces Q3 Results: Revenues/Margins Down

Monday, October 11, 2004

Press release from the issuing company

CHICAGO, Oct. 8 -- Commenting on the third quarter results, Rokus van Iperen, chairman of the Board of executive Directors of Oce N.V., said: "The growth in sales of new systems in the third quarter lagged behind the trend. Recurring revenues did not develop as anticipated. But this is a postponement rather than a cancellation of investments. In due course the further growth of the population of machines will lead to growing income flows from service." Revenues decreased in the third quarter by 1.1% to Euro 645.7 million. On an organic basis, revenues increased by 0.4%. Revenues were positively influenced by the book profit [Euro 8.1 million] on the sale of the lease portfolio. This was cancelled out by lower interest income from the consequently reduced lease portfolio [Euro 8.0 million]. Exchange rate effects reduced revenues by 1.5%. Non-recurring revenues booked an organic increase of 10.0% [excluding the sale of lease contracts: 4.6%]. Recurring revenues [service, rental, leasing, business services and media] decreased organically by 2.7% [excluding the sale of lease contracts: - 1.5%]. The gross margin amounted to 40.3%. This was a decrease of 1.2% compared to the third quarter of 2003. Of this margin decrease, 0.5% was attributable to exchange rate results. The volume/mix effect reduced the margin by 0.7%. This reduction was mainly caused by decreasing service income in the Strategic Business Unit Digital Document Systems. Operating expenses include an amount of Euro 7.3 million in the form of impairment charges. Excluding impairment, operating expenses were Euro 9.2 million lower. On an organic basis this decrease amounted to 2.7%. Operating income [EBIT] before impairment decreased by 6.7% to Euro 23.9 million as a result of a lower margin and lower costs. Organically, operating income before impairment grew by 7.0%. Operating income increased from Euro 2.7 million to Euro 16.6 million. Interest charges were 29.3% lower than in the corresponding period of last year and amounted to Euro 4.8 million. The tax charge includes a release of Euro 5.6 million from a provision, which meant that the tax burden during the quarter was negative. Excluding this release and impairment, tax charges amounted to 29.0%. Net income amounted to Euro 14.1 million [2003: - Euro 5.6 million]. Net income excluding impairment and excluding the release of the tax provision amounted to Euro 12.9 million, an improvement of 1.9% on the third quarter of 2003. Net income per ordinary share outstanding was Euro 0.16 [2003: - Euro 0.08]. Impairment costs of Euro 7.3 million were charged to operating income in the third quarter. This represents the remaining amount of goodwill that had been capitalized in the Display Graphics business group. For Oce it is very important to have a presence and to expand further in this potential growth segment. Results nine months 2004 Revenues amounted to Euro 1,950.3 million, a decrease of 3.6% compared to the corresponding period of 2003. Revenues showed an organic increase of 0.9%. The book profit on the sale of the lease portfolio amounted to Euro 20.8 million. Interest income from financial leases was down by Euro 18.5 million. Non-recurring revenues increased organically by 11.5% [excluding the sale of the lease contracts: 7.1%]. Recurring revenues decreased on an organic basis by 2.3% [excluding the sale of the lease contracts: -1.6%]. The gross margin amounted to 41.9%, an increase of 0.4% compared to the first nine months of 2003. Exchange rate/hedge results had an adverse impact of 0.4% on the margin. The volume/mix effect brought an improvement of 0.8% in the margin. Operating expenses excluding impairment decreased by 1.3%. Operating income rose by 3.6% to Euro 81.3 million. Operating income before impairment decreased by 12.7% to Euro 88.6 million. Interest charges were 38.3% lower at Euro 14.5 million. The tax charge amounted to 18.6%. Excluding the release of the tax provision and impairment, the tax charge was 28.2%. Net income amounted to Euro 52.7 million [2003: Euro 34.5 million]. Net income before impairment and the release of the tax provision amounted to Euro 51.5 million. Net income per ordinary share outstanding was Euro 0.60 [2003: Euro 0.38]. Interim dividend For the 2004 financial year the interim dividend to be distributed will remain unchanged at Euro 0.15 per ordinary share. The interim dividend will be made available entirely in cash and will be obtainable for payment as from October 25, 2004. Prospects Although organic growth in the third quarter was lower than in the second quarter, this is not expected to cause a reverse in the positive trend in revenues. Thanks to the strength of its product portfolio Oce will improve its position further, despite the weak recovery in most of the markets in which Oce is active. Net income is expected to be between Euro 75 and Euro 80 million. The full report can be downloaded at the international website http://www.oce.com/en/Investor/Quarterly+reports/2004-Q3.htm




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